G.M. Filisko is a Chicago area freelance and former editor for REALTOR® Magazine.
Get First-timers to Closing
Give First-Timers the Direction They Need
October 1, 2009
Nervous. Arrogant. Cautious. Excited.
Although these words seem contradictory, they sum up today’s first-time buyers.
"First-time buyers are many things at once," explains Paul Gorney, a sales associate at Sudler Sotheby’s International Real Estate in Chicago. "They’re scared to pay too much, excited to get a ‘good deal,’ and confused because of the number of homes and the situations in which sellers are selling, such as short sales and foreclosures.
"First-timers need serious guidance," he says.
That guidance is especially critical for buyers who are trying to beat the Nov. 30 closing deadline to qualify for the federal first-time home buyer tax credit. (At press time, it was unclear whether the credit would be extended.) Here’s how to overcome three false assumptions that can derail first-timers.
1. "The housing market is weak."
First-timers have likely read every stitch of news about how homes aren’t selling. The trouble is that’s simply not true in many entry-level markets.
"First-time buyers need to understand the environment they’re competing in," says Dana Graham, CRS®, a sales associate at Prudential California Realty in Palos Verdes, Calif. "In my market, homes for first-time buyers priced under $800,000 are hotter than a $2 pistol. A few months ago, one had 21 offers."
Graham turns that fact into a positive. "If there are so many other buyers," he tells first-timers, "you’re not dumb to be buying now."
2. "I need to see all the options."
Many buyers proceed with excessive caution because of the endless inventory and their desire to find the perfect home. That can lead to paralysis by analysis, says Kathleen Alexander, ABR®, CRS®, a sales associate with Keller Williams Realty Boston Metro. Like Graham, Alexander uses facts to get buyers off the fence. "I make sure they’re armed with all the data they could possibly desire—which homes have sold in which areas and for how much—and I explain how to interpret the data," she says. "I want them to have a firm grasp on the market. That takes away a lot of the hesitancy."
Graham stresses today’s low interest rates. "I tell them that rates now are late-1950s type rates," he says. "They have nowhere to go but up. If they go to an entirely plausible 7.5 percent—which is still low—prices would have to go down by about another 20 percent to make up for the difference in their monthly payments."
Don’t forget to remind them about the first-time home buyer tax credit deadline. "I tell buyers the tax credit is truly $8,000 they’ll get back when they file their taxes," says Sam DeBord, associate broker at RE/MAX Connected in Seattle. "If they normally get a tax refund, they’ll get an additional $8,000. It’s a gift from the government to get them started as home owners." (Note: There are income limits; buyers should consult a tax professional.)
3. "I’ve found a bargain!"
It’s true that affordability is at record levels today, but many buyers need help putting price into perspective.
"They think they can get a really, really nice house for $50,000, but the average home in our market is $150,000," says Craig Frooninckx, e-PRO®, GRI, a sales associate with DPR Realty LLC in Phoenix. "They perceive that there are really great deals, which is true. But a lot of homes in our area are stripped of all their fixtures. While a home may be listed for $60,000, buyers are going to need $40,000 in cash to replace the plumbing and restore the kitchen and bathrooms."
That can be hard for buyers to accept; Frooninckx often has to ferry them around so that they can witness the homes’ condition themselves. "We have to look at the really low-priced homes for them to realize they don’t want to do all that work," he says. "Then I say, ‘Give me a shot at showing you a couple of houses I think you’ll like.’"
Before you take on any first-time buyers as clients, do some due diligence. "I make them come in for a chat to make sure they’re serious and can qualify financially," Graham says. "It’s a litmus test. If they’re not willing to spend an hour or two to talk about their needs and financial situation, they’re not serious."